Generating Extra Revenue Streams Transfer Fees

 In this day and age of rising costs and uncertain economic climate, co-op and  condo administrators have their work cut out for them when it comes to finding  new ways to raise funds without drastically reducing services, raising  maintenance fees or charging residents special assessments.  

 One way many buildings—both co-op and condo—address the issue is by charging a “flip tax” or “transfer fee,” payable directly to the building or development, whenever an owner sells his or  her unit.  

 In New York City, many co-ops and condos use what’s often called a “flip tax” in order to boost building revenue. The so-called “tax” is really a fee paid each time an apartment is sold—either by the purchaser or seller. The money collected goes back to the co-op or  condo’s reserve fund. In New Jersey, the concept of the flip tax exists in several  forms, but here they’re generally called transfer fees or “resale contributions.”  

 According to Edward S. Frank, a property manager with Arthur Edwards Inc. in  River Vale, “People seem to shy away from a term that has ‘tax’ in it. That is why you don’t hear the term ‘flip tax’ in New Jersey. On the co-op side they call it a ‘realty transfer fee’ and on the condo side they call them ‘resale contributions.’”  

 There is also case law that prohibits flip taxes in some instances, says  attorney Ronald L. Perl, a partner in charge of the community association  practice group for Hill Wallack in Princeton. A board can not just decide to  institute a transfer fee; there are procedures that must be followed. “Flip taxes are illegal unless specifically authorized by the [association’s] governing body. They’re permitted only if authorized in the original master deed or bylaw or amended  to include them. I think New Jersey courts were concerned with giving governing  boards—often just five or seven people—the authority to impose this without some sort of vote by the owners.”  

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